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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (36164)	2/14/2002 2:26:14 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70240

HP Profit Beats Raised Forecast Wednesday February 13, 8:00 pm Eastern Time By Peter Henderson SAN FRANCISCO (Reuters) - Hewlett-Packard Co. (NYSE:HWP - news) on Wednesday reported first-quarter profits above Wall Street expectations it had raised last week, as consumers snapped up personal computers and printers. Choose loan type: Home EquityRefinanceNew Mortgage The Palo Alto, California-based company said the results proved management's case it can successfully integrate takeover target Compaq Computer Corp. (NYSE:CPQ - news), but it tempered expectations for the current quarter, saying consumer spending could slow and earnings would fall slightly. HP posted a net profit of $484 million, or 25 cents per diluted share, for the first quarter ended Jan. 31, up from $141 million, or 7 cents per share, in the year-earlier quarter. Excluding one-time items and accounting adjustments, HP posted a profit of $564 million, or 29 cents per diluted share, compared with $812 million, or 41 cents per share, in the year-ago quarter. Sales fell to $11.4 billion from $12.4 billion in the year-earlier quarter. Analysts polled by research firm Thomson Financial/First Call had forecast operating earnings of 18 cents to 27 cents per share on sales of $11.1 billion. On Feb. 4, HP had said it would substantially beat the existing consensus of 16 cents per share. Shares in Hewlett-Packard rose to $21.31 in after-hours trade on the Island system, bringing their gain on the day to 2.5 percent. The shares had closed at $20.98 on Nasdaq. Kevin McCloskey, a portfolio manager at Federated Investors in Pittsburgh who is wary of the merger, said the results topped expectations but did not convince him of the merits of the $22.5 billion deal. ``HP has some good businesses, Compaq has some decent businesses and they think putting one and one together gets two or maybe even three. But I'd say we're not that positive that would happen,'' he said. Hewlett-Packard said the strong personal computer sales to businesses and consumers returned the total PC business to profit, and digital imaging and outsourcing showed strength. Profitability rose in imaging and printing, personal computers and IT services, driving the earnings per share surprise. COMPANY CREDITS COST-CUTTING Chief Financial Officer Bob Wayman said HP's two-and-a-half year campaign of cost cutting was finally paying off. ``We have been working and working on getting expenses sized to the changed environment and then you see a little bit of an uptick in revenue, and voila, you see a big improvement in the bottom-line,'' he said on a conference call with investors. Hewlett-Packard has traditionally seen revenue rise in its second quarter from its first, but Wayman said that with corporate spending still slow and economic prospects uncertain, revenues and earnings per share were both likely to decline. Earnings per share would be consistent with analyst consensus forecasts of around 25 cents per share, he said in an interview. ``The outlook is either disappointing or conservative, depending on how you look at it. But I think most people were expecting revenues to be up sequentially in Q2,'' said Sanford Bernstein analyst Toni Sacconaghi. Andrew Scott, of Needham & Co., was more positive, saying holiday sales boosted the first quarter. ``It stands to reason they will have more cautious guidance because you're not going to have the digital Christmas phenomenon.'' The results marked the second quarter in a row that HP beat analyst expectations, after a year of disappointments, and Chairman and Chief Executive Carly Fiorina took the opportunity to buttress her arguments for the merger. ``Our execution these past two quarters demonstrates that we're ready to take this decisive step,'' she said in a statement. ``We know our business better than anyone else,'' she added in a conference call. But, she said, ``a lot more is needed. And with Compaq, we have a detailed plan.'' HP says the merger with Compaq will create a computer and services powerhouse, while opponents including founding family heir and dissident director Walter Hewlett say the deal will bloat the company's personal computer business and sap resources better focused on high-end products. Hewlett said the results simply proved that HP did not need Compaq -- or its low profit PC business. ``We believe HP needs to focus on its strengths,'' he said in a statement. Hewlett-Packard stock is down about 10 percent from the close on Aug. 31, the last day of trade before it announced plans to merge with Compaq, while rival International Business Machines Corp. has gained about 8 percent since then. [Harry: I am not sure why the author is surprise HWP is guiding flat to down next Q. The December is a traditionally strong Q as it contains the excesses of Christmas shopping. It is typically followed by decrease demand the next Q. Even if HWP is coming off a bottoming in demand, I don't see that overcoming the the normal seasonal pattern. A pick in demand is definitely indicating a return to more normal demand patterns and should ripple out to other sectors slowly.]